China's deflation drags oil down

Asian Markets

China's consumer prices slipped back into deflation for the first time in a year, with the CPI index declining by 0.7% year-over-year in February, deeper than the anticipated 0.4% drop and a stark reversal from January's 0.5% increase. Producer prices also saw a sharper-than-expected fall of 2.2%, highlighting persistent deflationary pressures and concerns about domestic demand.

Commodities

WTI crude oil continued to struggle, trading around $66.45 in early European hours. The downside was exacerbated by softer inflation data from China weighed on the outlook for oil demand, and the ongoing tariff tensions as China imposed levies on Canadian agricultural products worth over $2.6 billion in response to Canada’s tariffs on Chinese electric vehicles, steel, and aluminum.

Gold

Gold prices (XAU/USD) are maintaining a narrow trading range, holding firm above the $2,900 level during early European hours on Monday. The metal's stability is largely attributed to persistent worries about the potential economic impact of U.S. President Donald Trump’s trade tariffs and the broader risks of a global trade war.

European Markets

Germany's industrial sector showed signs of a stronger recovery, with industrial production for January rising by 2.0% month-over-month, surpassing the forecast of 1.6%.

However, the German trade balance for January came in at €16.0 billion, falling short of the expected €21.0 billion and the previous month's €20.7 billion.

Currencies

This mixed data from Germany led to a cautious tone for EURUSD, which struggled to extend gains despite the positive industrial output figures.

G10 currencies made headway against the U.S. dollar, led by the Japanese yen.

Similar gains were observed in the Antipodean currencies.